Scott Gottlieb, MD: I’m a physician and a Resident Fellow at the American Enterprise Institute in Washington. I previously worked at the Food and Drug Administration as the agency’s Deputy Commissioner and before that, as a senior official at the Centers for Medicare and Medicaid Services where I supported the agency’s policy work on coverage and payment, particularly related to new medical technologies. I spend my time now analyzing developments in policy and regulation and their impacts on innovation, medical care, and the public health. I work with firms engaged in the financing of early stage healthcare ventures, giving me a firm grounding in how policies conceived in Washington are impacting private entrepreneurship on Main Street. I work as a senior advisor to Avalere Health in Washington, and as a member of the Product Investment Board of GSK. I am also an editorial board member of the journal Value Based Cancer Care, the Food and Drug Law Institute’s Policy Forum, and as a Clinical Assistant Professor at the NYU School of Medicine. Follow Scott Gottlieb on Twitter @ScottGottliebMD. Scott Gottlieb's articles can also be found at http://www.aei.org/scholar/scott-gottlieb/

Doctors Will Have To Take A Pay Cut Under Obamacare

The Obama Administration’s underlying assumption, all along, has been that doctors earn too much. In a little-noticed analysis published a few years ago in the Journal Health Affairs, one of the administration’s former assistant health secretaries, Sherry A. Glied, made a case that American doctors earn a lot more than their counterparts in Europe.

The analysis was done before she took her government job. But it seems to reflect a more deeply held view inside the Administration.

The study compared fees paid by public and private payers for primary care office visits and hip replacements in Australia, Canada, France, Germany, the United Kingdom, and the U.S. It found that annual pre-tax income (net of practice expenses) for primary-care doctors was $95,000 in France in 2008, compared to $186,000 in the United States.

For specialists, the disparities were wider. U.S. orthopedic surgeons earned the highest average annual incomes at $442,450, followed by $324,138 for surgeons in the United Kingdom. Although UK surgeons still earned 50 percent more than surgeons in the other comparison countries, they earned 30 percent less than US orthopedic surgeons. Orthopedic surgeons averaged $154,000 in France and $208,000 in Canada.

The differences reflect lower rates for individual services. In France, for one, private insurance pays doctors about a third of what US physicians earn for office visits — $34 in France vs. $133 in America for a primary-care doctor. Even public programs like Medicare pay twice what similar French programs offer.

The analysis was stated in 2008 dollars and adjusted for purchasing power parity. But like other doctor pay comparisons, it didn’t adjust for differences in the relative wealth of nations.

Nor did it try to adjust for the compensation offered by competing professional endeavors that might compete for the same talent that often goes into medicine.

For example, in the U.K. the average salary for a lawyer is about $80,000 U.S. dollars, versus around $113,000 here in America, according to the Bureau of Labor Statistics. For corporate (in house) attorneys, the gaps are even wider.

In the U.K, average starting salaries for in-house lawyers are about $68,000 according to one recent survey, and $56,000 for Germany. In the U.S., an in house attorney begins her career at an average salary of $105,000.

The average in-house lawyer with 10 years of experience can earn €113,000 ($139,905) a year in Ireland, but only €102,000 ($130,000) in France. In the U.S., the same lawyer earns an average of $190,000.

If other professionals earn more in the U.S. than they’d earn in comparable companies, wouldn’t it make sense to see the same differences among doctors?

Nonetheless, the analysis reached the conclusion that the bigger American salaries “were the main drivers of higher U.S. spending” on health care. As public programs come under fiscal pressure, this reasoning will gain traction.

Further government financing of medical school, of course, will give federal agencies a greater say over the choices doctors make, and the specialties they choose. But with reimbursement rates falling, and medical practice costs rising, doctors will be squeezed into these sorts of accommodations.

So do doctors earn much money? It’s hard to say. Medicare largely sets their reimbursement. Not consumers, who can more accurately value the services.

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